President of the Association of Bureaux de Change Operators of Nigeria (ABCON), Dr Aminu Gwadabe, has attributed the currency rally of naira to market reforms embarked on by the Central Bank of Nigeria (CBN).

The naira traded around N1,590/$ at the parallel market in the past few days, less than a week after the launch of the Nigeria Foreign Exchange (FX) Code.

Earlier in the week, the naira had risen marginally to N1,620/$ with stakeholders attributing the appreciation to an increase in supply through the banks.

In the official window, the naira appreciated to N1,475 on Friday, according to data from the Nigeria Foreign Exchange (NAFEM) platform.

The local currency traded at N1,520 at the close of business on Tuesday, before appreciating further to N1,506 on Wednesday and N1,493 on Thursday.

Gwadabe said the ongoing rebound indicates that the CBN policies and reforms are working.

He said the naira recorded a major comeback, trading at its best position in seven months last week.

This is as Gwadabe has called on the apex bank to review downwards the huge capital requirement for BDC recapitalisation, saying meeting the capital base remains a big challenge for many operators.

He also called on the CBN to grant ABCON a self-regulatory status to aid forward guidance of its members and adopt the operators’ IT platforms to entrench a tech-driven industry and boost transparency in market operations.

He said granting self-regulatory status to ABCON will enable the group to sanction erring operators on non-compliance and enhance compliance with regulatory guidelines.

Gwadabe attributed the naira rally to the newly implemented FX Code, rising investors’ confidence, investment in oil and gas output, and streamlining of diaspora remittances aimed at enhancing market liquidity as well as transparency.

He added that meeting the needs of BDCs will further strengthen the local currency against the dollar.

The new CBN guidelines require all Tier-1 BDC operators to raise N2 billion minimum capital to remain in business, while tier-2 players are to raise N500 million minimum capital. The tier-1 BDCs will operate nationally, while the tier-2 operators are to only operate in one state.

He backed the apex bank’s position that the FX Code is comprehensively addressing various aspects of market conduct and practice; it is not intended to be exhaustive.

He said the policy authorises the CBN to establish and enforce directives regarding the standards for financial institutions under which FX deals are to be conducted.

On January 28, the apex bank officially launched the foreign exchange (FX) code to promote best practices in the financial sector.

In the document, the financial regulator said the FX code, which became effective on December 2, 2024, aims to strengthen and promote the integrity and effective functioning of the wholesale FX market in Nigeria.

CBN said the initiative would facilitate better functioning of the market, further reinforcing Nigeria’s flexible exchange rate regime.

The new system makes it increasingly difficult to fictitiously demand FX or sell illicit supply.

At the launch, the governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, blamed unethical behaviours and systemic abuses, which eroded public trust in the naira.

The inability of the players in the exchange market to accurately forecast the naira rate has thrown businesses and investors into uncertainty, which is also fuelling high inflation.

Cardoso blamed those who had access to political power or their complicit participants for the fate of the currency.

The CBN said it would no longer tolerate attempts to revert to previous abuses. It threatened that it would come hard on anyone or individuals who attempted to violate the FX Code.

Though the naira may still be undervalued and too high for comfort, Cardoso insisted that the reform journey is yielding results, explaining that last year was marked by structural reforms that sought to return the naira to a freely determined market price and ease volatility as several distortions were removed from the market.

He said: “Reforms including discontinuation of quasi-fiscal interventions, unifying the exchange rate windows, clearing a backlog of foreign exchange commitments, and recalibrating monetary policy tools were all necessary to redirect the course of our economy, restore order and credibility to our FX market and refocus the CBN on its core mandates.”

The apex bank boss highlighted the positive effects the Electronic Foreign Exchange Matching System (EFEMS) has had since its introduction in December 2024.